It’s True – 401-Ks make for Worse Pensions for Teachers

If someone tells you your kid’s teacher would be better off with a 401(k) than a pension, don’t believe it

A teacher works with her fifth-grade students in South Los Angeles on November 17, 2016. (Los Angeles Times)

— By Nari Rhee – Op-Ed in LA Times —

Two years ago my beloved high school English teacher Mrs. O-W posted on social media, after locking up her classroom for the last time, “It was a happy place. I will miss both it and the kids, but NO MORE ESSAYS!” After 32 years of service in public education, Mrs. O-W finally left what she calls “the best job ever” in 2015 with a hard-earned pension from CalSTRS, the California State Teachers Retirement System.

Like Mrs. O-W, most public school teachers working today count on traditional pensions — which guarantee a monthly income based on age, salary and years of service — as the main source of financial security in retirement. Forty percent of teachers nationwide aren’t covered by Social Security; pension plans, in which employer and employee contributions are invested in a pooled, professionally managed fund governed by a board of trustees, provide their only source of guaranteed retirement income.

Now teachers across the country are facing aggressive political attacks on their pensions. In 2010 Michigan placed new teachers into a hybrid plan consisting of a significantly reduced pension and a mandatory 401(k)-type plan. Last week, the state’s Republican governor, Rick Snyder, under pressure from right-wing legislators to scrap the pension component, signed a bill that will direct most new teachers into just a 401(k). Pennsylvania also recently passed a hybrid pension bill that pushes new teachers into 401(k)-only plans, and similar efforts are afoot in other states.

As they move to dismantle secure pensions for teachers, GOP politicians are starting to argue that eliminating guaranteed pensions is what’s best for teachers. They base this claim on dubious research, sponsored by anti-pension groups, that uses high attrition rates among entering teachers to claim that “most teachers” don’t stay in their jobs long enough to get a decent pension.

Three out of four teachers currently working in the state will put in at least 20 years before leaving, and half will put in 30 years or more.